COBRA Subsidies Under ARPA – COBRA Administrators and Insurance Companies Should Help
On March 11th, 2021, President Biden signed the American Rescue Plan Act (ARPA) into law. ARPA is a $1.9 trillion economic relief bill that gives financial help during the ongoing COVID-19 pandemic. The new law includes section 9501 that describes the COBRA premium subsidy provision. The new law impacts every employer that offers group medical, dental, and vision coverage.
ARPA gives any employee who lost insurance coverage due to a reduction of hours or was fired (except for gross misconduct) up to 6 months of free insurance coverage through COBRA. Former employees can get this free COBRA coverage even if they declined COBRA when they were first eligible.
In most cases, the employer must pay the cost (premium) for the former employee and receive a credit on employment (FICA) taxes to offset the cost. While this new law appears burdensome for employers, the good news is that COBRA administrators should guide employers with 20 or more employees through the process so that they stay in compliance.
It is our understanding that Insurance companies will manage ARPA compliance and subsidies for employers with 1 – 19 employees who are not subject to COBRA but who must comply with state “mini-COBRA” laws, such as CalCOBRA. Blue Shield of California recently announced that they would manage this for small employers as part of their Cal-COBRA administration.
If you are a client of BenefitsCafe.com we can help you coordinate with the COBRA administrator and with the insurance companies for compliance with ARPA. Just give us a call 800-746-0045.
Additional ARPA COBRA Resources
The U.S. Department of Labor has a very informative FAQ on the ARPA COBRA Subsidy that you may find helpful. Below are some details about who is eligible, the time period to enroll, and info on the subsidy.
ARPA is available to “assistance eligible individuals” (AEIs). It also offers a Special Election Period to AEIs who chose not to enroll in COBRA in the past.
What is an AEI?
An AEI (assistance eligible individual) is someone who loses group health coverage due to a reduction in hours or an involuntary termination (except if due to gross misconduct). This does not include when an employee voluntarily quits. Also, the reason for termination does not have to be related to COVID-19.
What is the subsidy?
ARPA offers free COBRA continuation of coverage to AEIs, including the 2% administrative fee, for up to 6 months between April 1st, 2021 and September 30th, 2021. This subsidy covers all Medical, Dental, and Vision group plans that are subject to COBRA. This subsidized coverage will end if the AEI becomes eligible for another employer’s group health plan or becomes eligible for Medicare.
Who pays for the subsidy?
The “person to whom premiums are payable”:
- For a multi-employer plan, the plan pays.
- For a fully insured plan that is subject to COBRA, the employer pays.
- For a self-funded plan, the employer pays.
- For any group health plan not described above, the insurer pays.
The “person to whom premiums are payable” will be entitled to a tax credit against their quarterly Medicare taxes. If the credit exceeds the premium, a refund will be available.
Special Election Period
AEIs have a new opportunity to elect COBRA if they meet the following criteria:
- Experienced a qualifying event prior to 4/1/21.
- Did not elect COBRA or allowed it to lapse.
- Have not exhausted their maximum COBRA coverage period.
Plan administrators must provide a revised COBRA election notice within 60 days of April 1st (May 31st). AEIs must elect their coverage within 60 days of receiving the notice from their plan administrator. This new election does not extend the maximum COBRA coverage period.
Benefits Cafe will help our clients connect with COBRA administrators and the insurance companies to comply with ARPA. Just give us a call if you would like our help, 800-746-0045.